Question

On January 1, Pete Rowe bought a ski chalet for $48,000. Pete is renting the chalet for $49 per night. He estimates he can rent the chalet for 190 nights. Pete’s mortgage for principal and interest is $442 per month. Real estate tax on the chalet is $440 per year. Pete estimates that his heating bill will run $60 per month. He expects his monthly electrical bill to be $20 per month. He pays $12 per month for cable television.

a. What is Pete’s return on the initial investment for this year? (Round your answer to the nearest tenth percent.)

Pete’s return             %

b. Assume rentals drop by 10% and monthly bills for heat and electricity drop by 10% each month. What would be Pete’s return on initial investment? (Round your answer to the nearest tenth percent.)

Pete’s return             %

Answer 1